Panel Admits Defeat in Bid to Trim Deficit

Published Nov 21, 2011. By Bobby Caina Calvan and Alex Katz. In The Boston Globe.

 

WASHINGTON — After months of secret meetings amid public exhortations, the bipartisan deficit supercommittee yesterday gave up its attempt to pare the federal deficit, setting up the specter of $1.2 trillion in automatic cuts to defense and domestic programs.

‘‘I’m deeply disappointed with this outcome,’’ said Senator John F. Kerry, who gathered fellow committee members in his office yesterday morning in a final, failed bid to reach common ground. ‘‘This was an historic moment to do something big, bold, and balanced that demanded shared sacrifice to put our country first.’’

The panel had until midnight last night to produce a plan for the Congressional Budget Office to study and release for a vote before Congress. In the end, despite its mandate to put all options on the table and its broad powers to force an up-or-down vote on its plan with no amendments and no chance to filibuster, the committee could not overcome the same partisan pressures that have hamstrung deficit-minded lawmakers for months.

 

When the panel was created, it was agreed that its failure to craft a deficit-cutting deal would activate automatic cuts in 2013, which some say would decimate defense and domestic programs. That threat was intended to force the committee to negotiate a more comprehensive deal acceptable to both parties.

 As it became evident an agreement was not coming, some in Congress began scurrying to undo some of these cuts.

But President Obama, speaking yesterday about an hour after the committee officially admitted defeat, said he would veto any such effort.

‘‘There will be no easy off-ramps on this one,’’ the president said.

The deficit panel’s announcement came after the financial markets closed, with the Dow Jones Industrial Average tumbling 248.85 points in part because of the expected failure. Moody’s and Standard & Poor’s, which downgraded its rating on US debt securities in the late summer, said the news would not lead to an immediate cut in ratings. Fitch, however, said it could cut the outlook on its ‘‘triple-A’’ rating, according to Reuters.

Such a decision could stagger the markets.

With the national debt eclipsing $15 trillion and an election year about to begin, echoes from the ideological chasm over tax increases and spending cuts had been heard throughout the Capitol for much of the past month.

Democrats had blamed Republicans for being too inflexible on new revenues, including tax increases on the richest Americans, and relying almost exclusively on spending cuts. Republicans cast Democrats as unwilling to address cuts to such entitlement programs as Medicare and Social Security or engage in wide-ranging tax reform.

Yesterday, however, members of the committee were more reflective and subdued. They praised those on the other side of the aisle, saying that it was not because of a lack of effort that an agreement could not be reached.

‘‘There are big, big ideological philosophical divides among some of the folks,’’ Kerry said in an interview.

‘‘It’s hard to point the finger at any one party,’’ said Josh Gordon, the policy director for the Concord Coalition, a Washington-based nonpartisan group focused on fiscal responsibility. ‘‘The problem is that each party has leadership that doesn’t allow compromise.’’

The Joint Select Committee on Deficit Reduction, created by congressional leaders as part of a deal in August that cut almost $1 trillion in spending while allowing the government to borrow more, first convened in September. Members were asked to come up with $1.2 trillion in additional cuts, but others urged them to consider developing a more comprehensive plan that totaled about $4 trillion.

Almost from the beginning, budget hawks feared it was doomed to fail. The 12 members met mostly in private, although they occasionally gathered in public to receive testimony.

Tax cuts put in place by President George W. Bush’s administration were a key sticking point, according to Kerry and others. Republicans insisted they be built into any deficit-reduction plan along with deeper spending cuts. Democrats called on the richest 2 percent of Americans to give up their tax cuts in the interest of shared sacrifice as part of a deal that would have included cuts to programs for the poor and elderly, including entitlements.

Many liberals advocated allowing the Bush tax cuts to expire at the end of next year on all Americans, returning nearly $4 trillion to the US Treasury over the next decade, a figure that would supersede the committee’s goals without any spending cuts.

Many economists, moderate Democrats, and President Obama countered that raising taxes on all Americans would shake an already roiling economy.

The supercommittee’s fate seemed foreshadowed weeks ago. On Nov. 1, deficit hawks Alan Simpson and Pete Domenici, both Republicans, and Democrats Erskine Bowles and Alice Rivlin urged members to strike a far-reaching deal that totaled about $4 trillion in savings. Reaching a scaled-down deal — or no deal at all and allowing the automatic cuts to kick in — would only perpetuate the problem, they argued.

‘‘Collectively, I worry you are going to fail: fail the country,’’ said Bowles, a cochair of President Obama’s deficit commission last year.

Despite the premonition and exhortations, that was the committee’s last meeting, public or otherwise. Kerry, a Democrat; Republican Senators Jon Kyl of Arizona and Rob Portman of Ohio; and others tried to broker elements of a deal in private, sometimes meeting over Chinese food.

By this past weekend, however, some of the committee members seemed to give up the effort, even leaving Washington with the rest of Congress on their Thanksgiving recess as the deadline approached. On Sunday, some members began the finger-pointing. Kerry and Kyl went on NBC’s ‘‘Meet the Press,’’ accusing their colleagues from across the aisle of being inflexible.

Yet, one last burst of drama remained.

Yesterday morning, Kerry thought there might be a sliver of a chance to produce some deal. He called Kyl to see if they could convene a meeting, followed by a call to Portman, who served as a former budget director under George W. Bush. Soon, two more members of the deficit panel were at his office.

Senator Max Baucus a Montana Democrat, and Senator Patty Murray of Washington, the panel’s Democratic cochair, arrived while the meeting was in progress.

A scrum of cameras and reporters waited to ask the $1.2 trillion question: Deal or no deal?

‘‘Conventional wisdom has never been my guidepost,’’’ Kerry said during a brief pause in the meeting. ‘‘I fight to the last minute possible, and that’s what I’m doing: try to get something done, try to find the sweet spot, find a reasonable place, see if you can’t get people to agree.’’

 In the end, Kerry and other supercommittee members accepted defeat.

 ‘‘No one should be really surprised by this result,’’ said Representative Michael Capuano, a Massachusetts Democrat who was not on the supercommittee. ‘‘But there’s still a long way to go before this whole issue is addressed.’’ Bobby Caina Calvan can be reached at [email protected].